Earlier this week the Bureau of Labor Statistics released its monthly inflation report. The numbers came in at 1.7 percent a year for all items. Excluding the ever-volatile food and energy, it was 1.9 percent.

That's about as low as inflation has been in the last 50 years. Only
1986 (1.1 percent), 1998 and 2001 (1.6 percent), 2008 (0.1 percent) and
2010 (1.5 percent) have come in lower, and a few years in the mid-2000s
registered the same.

The disappearance of inflation over the past 20 years, however, has
barely dented the pervasive belief that inflation remains one of the
greatest threats to economic stability. These convictions persist in
spite of all evidence to the contrary: Inflation is nowhere visible. For
many, that is just proof that we are living in a lull -- a phony war
soon to be disrupted when that age-old enemy reappears and wreaks havoc.

At the Federal Reserve -- legally mandated guardian of price stability
and responsible for monitoring and containing inflation -- the president
of the Richmond Fed, Jeffrey Lacker, has been warning
that the current policy of very low interest rates and expansion of the
balance sheet is almost certain to spark inflation in the near future.

In Europe, those views are even more deeply held. The German
Bundesbank -- still seared by memories of hyperinflation in the 1920s and
the collapse of political order that gave rise to the Nazis -- remains
ever vigilant. Its president, Jens Weidman, is strongly opposed to many
of the recent sovereign bailouts to preserve the euro on the grounds
that good money chasing bad will spark inflation.

These officials tend to be firm yet measured in their concern ‑
something that cannot be said of populist politicians and analysis. The
Tea Party is fueled not just by debt animus but by a deep-seated belief
that "real" inflation is much higher than what the government reports,
and it insists
that the spending habits of the government will end in the collapse of
the dollar, hyperinflation and the government's de facto stealing from
hard-working Americans' money.

That
is the fear of gold bugs, and added to the mix are the views of former
Representative Ron Paul and his son, Senator Rand Paul (R-Ky.), that the
Fed is putting the United States in inflation peril. Many professional
investors and economists are similarly convinced that the current
policies of zero interest rates and deficit spending are setting the
stage for massive inflation.

How to explain the inverse relationship between inflation concerns
and inflation realities? Yes, low inflation in recent years has been
juxtaposed with modest economic growth and wage stagnation for most
Americans ‑ as well as for most Europeans and Japanese. Given that
perceptions of economic well-being are ultimately tied to disposable
income, these forces have largely canceled each other out.

In addition, people tend to be acutely aware of the volatility of
energy and food prices, which have spiked - and then receded - many
times in past years.

Yet even with food and fuel, inflation perceptions can be deceptive.
Many people are aware that the price of a loaf of bread has risen from
less than 40 cents in the 1970s to an average of more than $2 today.
Food prices have also risen periodically over the past few years in the
face of global demand and droughts. That cements a perception of
inflation.

Yet over the past few decades, food as an overall percent of income
has gone down, down and down. In 1972, Americans spent 15 percent of
their disposable income on food; today, that figure is 11 percent. The only shift
has been in eating out ‑ people spend more on restaurants and much less
on food at home. And that has happened even as incomes have stagnated.
Gasoline, which has fluctuated widely, has maintained a steady share of
disposable income for decades, at about 3.5 percent, which is now
decreasing because of production from shale oil deposits and
ever-more-efficient vehicles.

One of the strongest arguments for vigilance against inflation comes
from economists following the dicta of Milton Friedman that "inflation
is always and everywhere a monetary phenomenon." In that view, the
actions of governments and central bankers are the determining factor,
and the experience of the 20th century was that inflation
often followed government policies, especially promiscuous government
spending. Since that is what happened in the past, many are firmly
convinced that it will, perforce, happen in the future.

One pernicious cliché is that history repeats itself. It doesn't.
Historians repeat each other ‑ and economists then pile on with theorems
based on a limited amount of history that then constitute "laws" of
economics.

Unquestionably, inflation was a systemic threat not just in the 20th
century but for centuries before. Thus the absence of inflation today
is explained as an anomaly soon to end; an artificial state of affairs
generated by easy-money policies of governments and central banks around
the world; or a false statement in that inflation is underreported by
governments interested in pretending it doesn't exist.

The virtue of these arguments is that they are not falsifiable. You
can't prove there isn't a government conspiracy about "real" inflation,
and you can't prove that something isn't about to happen. If you argue
that there has been a systemic shift - that, say, technology and
globalization have combined to send manufactured goods ever lower (with
food as much a manufactured good as a computer) - you can easily be
dismissed for foolishly contending that "this time it's different."

What, then, is the statute of limitations for inflation? How long
must there be low, low inflation before the risk of it is judged as de
minimus?

Yes, it might rear up in future. Yes, past patterns may prove
correct. It would be foolish not to be on guard about the possibility
and the risk ‑ just as it would be foolish not to forget that we still
live in a world suffused with nuclear weapons.

Yet it would be equally foolish to ignore the weight of evidence
about low inflation everywhere around the globe, not just for the past
few years but over the past few decades. The consequences of planning
for a war that never happens can be just as deleterious as fighting that
war unprepared.

If inflation is not the proximate risk of today's economy, then we
are radically misjudging our problems and missing solutions. If
inflation is not a dire threat, then we need not be so concerned about
government spending or central bank policy. We should instead focus on
the ability of our national economies and the global economic system to
generate sustainable living standards for billions of people.

Right now, so many are so fixated on inflation that these other
challenges receive short shrift. If inflation revives, that fixation may
be justified. If not, we will have squandered our time chasing echoes
instead of meeting our present with eyes wide open to the possibilities
of the future.

This post originally appeared at Reuters.com, an Atlantic partner site.

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